Below are 40 high-quality MCQ questions with answers covering Domain 2 – Conducting the Internal Audit Engagement (40% weight) from the CIA Part 1 – 2024 NEW Syllabus.
Covers: Planning, Engagement Objectives & Scope, Risk & Control Assessment, Engagement Resources, Fieldwork, Sampling, Data Analytics, Evidence, Root Cause, Fraud, Workpapers, Supervision, Agile auditing, etc.
✅ CIA Part 1 – Domain 2 MCQs (with Answers & Explanations)
SECTION A — PLANNING THE ENGAGEMENT
1. During planning, the internal auditor’s FIRST step is to:
A. Perform walkthroughs
B. Understand the engagement’s objectives
C. Obtain background information
D. Identify key risks
Answer: C.
Explanation: Gathering background information is the initial step before setting objectives or identifying risks.
2. Which document defines the purpose, scope, and responsibilities of the engagement?
A. Audit Program
B. Engagement Workpapers
C. Engagement Plan
D. Charter
Answer: C.
Explanation: The engagement plan details objectives, scope, timing, and responsibilities.
3. When assessing risks during planning, the internal auditor should consider:
A. Only inherent risks
B. Only control risks
C. Both inherent and residual risks
D. Only risk appetite
Answer: C.
Residual risk is key to determining audit focus.
4. Which is MOST appropriate when narrowing audit scope?
A. Increase resources
B. Focus on high-residual-risk areas
C. Expand testing
D. Reduce materiality
Answer: B.
5. A process with strong controls but high inherent risk should be:
A. Excluded from scope
B. Audited with moderate focus
C. Audited with high focus
D. Considered low priority
Answer: B.
Controls reduce residual risk.
SECTION B — ENGAGEMENT OBJECTIVES & SCOPE
6. Objectives should be:
A. Broad and open-ended
B. Aligned to the risk assessment
C. Determined after fieldwork
D. Set by management
Answer: B.
7. A scope limitation imposed by management should be:
A. Accepted if documented
B. Reported to CAE
C. Ignored
D. Agreed by the auditor only
Answer: B.
8. The scope must ALWAYS include:
A. Every location
B. All transactions
C. Relevant risks, processes, and time period
D. 100% testing
Answer: C.
SECTION C — RISK & CONTROL ASSESSMENT
9. A control that prevents errors before they occur is:
A. Detective
B. Preventive
C. Corrective
D. Directive
Answer: B.
10. Key controls are best defined as:
A. Controls that address any risk
B. Controls that mitigate significant risks
C. Controls implemented by IT only
D. Controls that prevent fraud only
Answer: B.
11. The MOST objective method of evaluating control effectiveness is:
A. Management’s opinion
B. Auditor judgment only
C. Testing operating effectiveness
D. Relying on prior audit results
Answer: C.
12. A compensating control is used when:
A. A key control is ineffective
B. The auditor needs more evidence
C. Testing time is limited
D. Materiality is high
Answer: A.
SECTION D — FIELDWORK, TESTING, AND SAMPLING
13. The PRIMARY purpose of sampling is to:
A. Reduce cost
B. Increase reliability
C. Provide a representative basis for conclusions
D. Guarantee accuracy
Answer: C.
14. Statistical sampling differs from nonstatistical sampling because it:
A. Requires random selection
B. Needs large samples
C. Guarantees accuracy
D. Costs less
Answer: A.
15. Which sampling method gives every item an equal chance?
A. Haphazard
B. Judgmental
C. Systematic
D. Random
Answer: D.
16. Attribute sampling is MOST appropriate for:
A. Monetary misstatement
B. Control testing
C. Variance analysis
D. Fraud detection only
Answer: B.
17. Discovery sampling is ideal when:
A. Errors are expected to be high
B. Errors are rare but critical
C. Testing is expensive
D. Controls are manual
Answer: B.
18. When evaluating sample results, the auditor must:
A. Project error to the population
B. Retest the entire population
C. Ignore trivial errors
D. Accept management’s explanation
Answer: A.
SECTION E — AUDIT EVIDENCE & DOCUMENTATION
19. The most reliable type of evidence is:
A. Verbal
B. Internal documents
C. External confirmations
D. Observation
Answer: C.
20. Workpapers should demonstrate:
A. Auditor’s personal opinion
B. Supervisory review
C. Management agreement
D. Frequency of meetings
Answer: B.
21. The PRIMARY purpose of workpapers is to:
A. Support audit conclusions
B. Justify auditor salary
C. Allow management to evaluate staff
D. Replace reporting
Answer: A.
22. Which evidence is least reliable?
A. Emails from customers
B. Internally generated data without controls
C. Bank statements
D. Supplier confirmations
Answer: B.
23. Analytical procedures are used MOST effectively to:
A. Identify unusual trends
B. Confirm balances
C. Replace testing
D. Issue reports
Answer: A.
24. Data analytics provides MOST value when:
A. Performed manually
B. Used for 100% population testing
C. Replacing sampling entirely
D. Only used at year-end
Answer: B.
SECTION F — ROOT CAUSE & ISSUE DEVELOPMENT
25. A root cause is:
A. The underlying reason for a problem
B. The observed error
C. The effect of the issue
D. The management recommendation
Answer: A.
26. Which tool best identifies root causes?
A. Histogram
B. Risk matrix
C. 5 Whys
D. Trend chart
Answer: C.
27. A repeat audit finding most likely signals:
A. Weak auditor skills
B. Ineffective recommendations
C. Lack of management commitment
D. Low audit frequency
Answer: C.
SECTION G — FRAUD CONSIDERATIONS
28. The internal auditor’s role regarding fraud is to:
A. Detect all fraud
B. Prevent fraud
C. Evaluate controls to deter and detect fraud
D. Investigate all fraud cases
Answer: C.
29. Red flags are:
A. Proof of fraud
B. Indicators requiring professional skepticism
C. Grounds for termination
D. Final audit conclusions
Answer: B.
30. Key fraud risk factors include:
A. Independence
B. Opportunity, pressure, rationalization
C. Training
D. Low turnover
Answer: B. – The Fraud Triangle
SECTION H — SUPERVISION & QUALITY
31. Supervisory review ensures:
A. Auditors finish quickly
B. The engagement meets standards
C. Management agrees
D. Scope is expanded
Answer: B.
32. Engagement supervision occurs:
A. Only at planning
B. Only at reporting
C. Throughout the engagement
D. Only if mistakes occur
Answer: C.
33. Workpapers must include:
A. Auditor salary details
B. Review notes
C. Management personal data
D. Timesheets
Answer: B.
SECTION I — AGILE & MODERN AUDIT METHODS
34. Agile auditing emphasizes:
A. Long audit cycles
B. Heavy documentation
C. Iterative planning and frequent updates
D. Waterfall methodology
Answer: C.
35. A sprint review in agile focuses on:
A. Issuing the final report
B. Reviewing completed audit tasks
C. Budget analysis
D. Selecting random samples
Answer: B.
36. Kanban boards are used in audits for:
A. Budget approval
B. Visualizing workflow and progress
C. Risk scoring
D. Annual planning
Answer: B.
SECTION J — COMMUNICATION DURING FIELDWORK
37. Interim communication is MOST important when:
A. Scope has changed
B. No issues found
C. Management requests it
D. Testing has not started
Answer: A.
38. An issue that poses immediate risk should be:
A. Reported at the final meeting
B. Mentioned only in workpapers
C. Communicated promptly to management
D. Ignored
Answer: C.
39. Engagement observations must ALWAYS include:
A. Root cause, impact, recommendation
B. Auditor opinions
C. Budget variance
D. Management praise
Answer: A.
40. The purpose of closing meetings is to:
A. Finalize audit rating
B. Resolve disagreements and confirm facts
C. Set next year’s audit plan
D. Evaluate auditors
Answer: B.
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